Quantitative Effects of Fiscal Foresight

Eric Leeper, Alexander Richter and Todd Walker

American Economic Journal: Economic Policy, 2012, vol. 4, issue 2, 115-44

Abstract: Legislative and implementation lags imply that substantial time evolves between when news arrives about fiscal changes and when the changes actually take place—time when households and firms can adjust their behavior. We identify two types of fiscal news—government spending using the Survey of Professional Forecasters and taxes using the municipal bond market. The main contribution of the paper is a mapping from reduced-form estimates of news into a DSGE framework. We find that news about fiscal policy is a time-varying process and show that ignoring the time variation can have important consequences in a conventional macroeconomic model. (JEL E12, E62, H20, H30, H62)

JEL-codes: E12 E62 H20 H30 H62 (search for similar items in EconPapers)
Date: 2012
Note: DOI: 10.1257/pol.4.2.115
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Citations: View citations in EconPapers (109)

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Related works:
Chapter: Quantitative Effects of Fiscal Foresight (2010)
Working Paper: Quantitative Effects of Fiscal Foresight (2010)
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